Report for Q3 2016
Mr. Tom Erixon
President and CEO
Alfa Laval Group
- Key figures
- Orders received and margins
- Development per segment
- Geographical development
- Financials
- Outlook
www.alfalaval.com© Alfa Laval Slide 3
Key figures
Orders received declined 13% to SEK 7,540 million.
Net sales dropped 11% to SEK 8,581 million.
Adjusted EBITA* declined 20% to SEK 1,339 million.
Adjusted EBITA margin at 15.6% vs 17.3%
Non-recurring charge of SEK 1,100 million.
*Positive currency effect SEK 107 million.
July – September 2016
January – September 2016
Orders received declined 16% to SEK 23,351 million.
Net sales dropped 11% to SEK 25,730 million.
Adjusted EBITA* declined 20% to SEK 4,065 million.
Adjusted EBITA margin at 15.8% vs 17.5%
Non-recurring charge of SEK 1,100 million.
*Positive currency effect SEK 337 million.
www.alfalaval.com
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
0
2 000
4 000
6 000
8 000
10 000
12 000
= Order intake per quarter
= Order intake per quarter “large”
SEK million
Orders received
SEK million R 12
= Rolling twelve months value
Q2
13
Q11
5
Q2
15
Q4
15
Q2
16
Q3
16
Q3
12
= % development at constant rates by
quarter, year on year+XX%
Q4
12
Q11
3
Q3
13
Q4
13
Q11
4
Q2
14
Q3
14
Q4
14
Q3
15
-14
%
Q11
6
-15
%
+2
6%
+4
%
-6%
www.alfalaval.com© Alfa Laval Slide 5
Order analysis
Q3 2015 Q2 2016
Structural change, %
Organic development, %
Total
Currency effects,%
8,686
Q3 2016 versus Q3 2015 and versus Q2 2016 (MSEK)
7,540
+ 0.2
- 14.1
- 13.9
+ 0.7
8,101
7,540
-
- 9.6
- 9.6
+ 2.7
Total, %
Q3 2016 Q3 2016
- 6.9- 13.2
www.alfalaval.com© Alfa Laval Slide 6
0,0
3,0
6,0
9,0
12,0
15,0
18,0
21,0
24,0
0
250
500
750
1 000
1 250
1 500
1 750
2 000
SEK millions and in percent of sales
* Adjusted EBITA – ”Earnings before interests, taxes, amortization of goodwill and step up values and comparison distortion items.”
Adjusted EBITA / margin*
Q314 Q315 Q216 Q316Q313 Q413 Q114 Q214 Q414 Q115 Q215 Q415 Q116
www.alfalaval.com
Order Sales Backlog
Q3 2016 2,765 2,737 1,798
Q3 2015 2,545 2,671 1,818
Equipment division
Slide 7
Industrial Equipment saw growth in HVAC while
refrigeration declined on the back of non-repeats.
Sanitary declined due to non-repeats in dairy and
personal care. Underlying demand, however,
showed a continued positive trend.
OEM lifted by demand from engine
manufacturers.
Service slightly down due to vacation period in
Western Europe.
Industrial
Equipment
11%*
Sanitary
13%
OEM
6%
Service
6%
Year-on-year comparison
Sequential comparison
Highlights and sequential comments
*Share of Group total
+ =
+
=
+ -
+
-
www.alfalaval.com
Order Sales Backlog
Q3 2016 1,909 2,872 9,175
Q3 2015 2,885 3,555 12,014
Marine & Diesel division
Slide 8
M&D Equipment grew on the back of demand for
equipment going into cruise ships. Diesel demand
grew.
Marine & Offshore Systems affected by lower ship
contracting. Demand for offshore applications grew
from very low level.
M&O Pumping declined due to lower ship
contracting.
Ballast water convention ratified in the quarter.
- +
Year-on-year comparison
Sequential comparison
Highlights and sequential comments
Marine & Diesel
Equipment
7%*
Marine &
Offshore Systems
3%*
Service
13%*
*Share of Group total
Marine & Offshore
Pumping Systems
3%*
- -
-
--
=
www.alfalaval.com
Order Sales Backlog
Q3 2016 2,866 2,972 6,818
Q3 2015 3,256 3,467 8,285
Process Technology division
Slide 9
In Energy & Process, the upstream business grew
while downstream declined. Power did very well
whereas Inorganics, Metals and Paper dropped.
Food & LS was flat, despite non-repeat of a large
order. Vegetable oil and Food Solutions did well.
Water & Waste down due to non-repeat. Base
business showed strong growth .
Service affected by non-repeat of larger order in
previous quarter.
Service
15%*
=
+ -
- =
Year-on-year comparison
Sequential comparison
Highlights and sequential comments
Energy &
Process 11%*
Food & Life
Science 10%*
Water & Waste
Treatment 2%*
*Share of Group total
-
-
-
www.alfalaval.com
Orders received by customer segment
© Alfa Laval Slide 10
Industrial Equipment
OEM
Sanitary Equipment
EQD Service
-
=
+
=
Marine & Offshore Syst.
Marine & Diesel Eq.
Marine & Offshore
Pumping Systems
-
--
PTD Service
Food & Life Science
Water & Waste
Energy & Process
+
-
-
+
January – September 2016, at constant rates and like for like
Equipment division
Marine & Diesel division
Process Technology division
Year-on-year comparison
MDD Service -
www.alfalaval.com© Alfa Laval
Orders received by Region
Central
& Eastern
Europe 8%
North America 20%
Asia 31%
Latin
America
5%
Western Europe 23%
Nordic 11%
Year-on-year comparison
+16
-38
+10
-16
+13
=
July – September 2016, development at constant rates
-20
=
+12
-6-9
-6
Sequential comparison
www.alfalaval.com© Alfa Laval
Orders received by Region
Central
& Eastern
Europe 7%
North America 20%
Asia 35%
Latin
America
5%
Western Europe 22%
Nordic 9%
Year-on-year comparison
+15
-28
-7
+2
-18
-4
January – September 2016, development at constant rates
Report for Q3 2016
Mr. Thomas Thuresson
CFO
Alfa Laval Group
- Key figures
- Orders received and margins
- Development per segment
- Geographical development
- Financials
- Outlook
www.alfalaval.com© Alfa Laval Slide 14
Highlights
Order intake
Net sales
SEK millions July – September, 2016
7,540
8,581
www.alfalaval.com© Alfa Laval
Gross profit margin
30
35
40
45
In percent of sales
35.735.235.3
Q315
36.7
Q116 Q216 Q316Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Q415
www.alfalaval.com© Alfa Laval Slide 16
Gross profit margin
Q3 2015 Q2 2016
Mix/price
Load/volume
PPV
FX
Structure
35.2
Q3 2016 versus Q3 2015 and versus Q2 2016
35.7
--
--
++
+++
=
36.2
35.7
+
---
=
+
=
Q3 2016 Q3 2016
www.alfalaval.com
Comparison distortion items - Reorganization and cost adjustment initiatives
A program for reorganization and improved competitiveness with three
individual initiatives:
• Reorganization and adjustment of resources to demand
• Manufacturing footprint adjustment
• “Greenhouse” - a focused improvement project for three product groups
Total non-recurring charges estimated to be SEK 1.5 billion
Q3 2016 costs and the expected effects:• Non-recurring charges SEK 1,100 million
- SEK 600 million refers mainly to write-off of goodwill and step-up*, a non-cash item
- SEK 500 million refers mainly to staff reductions of some 700 employees
• Estimated savings SEK 300 million
- refers to overhead costs
- expected to be largely implemented by end of Q2 2017
* Refers to Greenhouse project
www.alfalaval.com© Alfa Laval Slide 18
Highlights
Order intake
Net sales
Adjusted EBITA
Adjusted EBITA-margin
Non-recurring charge
Profit before tax
Earnings per share
Earnings per share, excl step-up
ROCE
ROE
SEK millions July – September, 2016
7,540
8,581
1,339
15.6%
-1,100
93
-0.27
1.50
17.0%
13.9%
www.alfalaval.com
Divisional performance
© Alfa Laval Slide 19
Equipment Process Technology Marine & Diesel
Q3 2016 2015 2016 2015 2016 2015
Orders 2,765 2,545 2,866 3,256 1,909 2,885
Backlog 1,798 1,818 6,818 8,285 9,175 12,014
Sales 2,737 2,671 2,972 3,467 2,872 3,555
Op. profit 428 365 219 352 524 721
Op margin (%) 15.6 13.7 7.4 10.2 18.2 20.3
- Price/mix (pos)
- Volume (pos)
- Cost (neg)
- Price/mix (neg)
- Volume (neg)
- E&S (neg)
- Load (neg)
- Cost (neg)
- Volume (neg)
- Price/mix (neg)
- Cost (neg)
Comments on
operating profit:
www.alfalaval.com© Alfa Laval Slide 20
Cash flow from
- operating activities
- investing activities
Financial net paid
Total
Cash-flow statement
Pro Forma Free cash-flow*
SEK millions
*Incl. operating activities, capital expenditure and financial net paid.
9M
2015
3,975
- 458
- 379
3,200
3,138
9M
2016
3,054
- 344
18
2,728
2,710
Q3
2015
1,369
- 243
- 171
1,018
955
Q3
2016
911
-117
20
814
797
www.alfalaval.com© Alfa Laval Slide 21
Foreign exchange
SEK million
Translation effect
Transaction effect
Total
*Based on EUR/USD 1.12 and EUR/SEK 9.62
FY 17*
-
100
100
FY 16
-40
550
510
Projected FX-effect for 2016 as communicated in Q2 report:
SEK 475 million
Q3 16
2
105
107
Estimated impact on adjusted EBITA from FX fluctuations
9M 16
-85
422
337
www.alfalaval.com© Alfa Laval Slide 22
Order backlog as per Sept. 30
SEK millions
For delivery in 2016
0
5 000
10 000
15 000
20 000
25 000
For delivery after 2016
Q315 Q316Q312 Q313 Q314
17,791
6,9
13
10,8
78
22,117
14,1
03
8,0
14
book to bill
www.alfalaval.com
Sales
SEK (bln)
YTD 2016 25.7
Backlog, current year + 6.9
Orders “in-for-out” last year Q4 + 2.8
Subtotal 35.4
Change in “in-for-out” +/- ?
Price +/- ?
Full year 2016
Full year 2016
Report for Q3 2016
Mr. Tom Erixon
President and CEO
Alfa Laval Group
- Key figures
- Orders received and margins
- Development per segment
- Geographical development
- Financials
- Outlook
www.alfalaval.com© Alfa Laval Slide 25
Outlook for the fourth quarter
“We expect that demand during
the fourth quarter will be in line
with or somewhat higher than in
the third quarter.”
www.alfalaval.com© Alfa Laval Slide 26
www.alfalaval.com
Activity split O&G, total- Distribution of orders Q3 (MSEK) vs Q2 2016
2%
Process
Technology
Drilling Processing &Transportation
Petrochemicals
Grand total
3.3%
25
Refinery
2.3%4.8%
263 172 252
Marine &
Diesel
Share of total
Alfa Laval
124 97 0 0
= 149 = 360 = 172 = 252
712 (-4%)
221 (+80%)
= 933* (+8%)
= 12.4%
Alfa Laval
*) including Service
www.alfalaval.com
Marine & Diesel industry split- Distribution of sales LTM, September 2016
© Alfa Laval Slide 28
49%
Driver
Marine Offshore oil and gas
Diesel power Parts & Service
Share4%
30%
World trade &
fleet capacity
Oil & gas demand
and prices
Electrical power
needs
World trade
Environment & Energy, Marine
9%
Legislation and
fuel cost
8%
www.alfalaval.com
Marine & Diesel industry split- Distribution of orders LTM, September 2016
© Alfa Laval Slide 29
43%
Driver
Marine Offshore oil and gas
Diesel power Parts & Service
Share5%
36%
World trade &
fleet capacity
Oil & gas demand
and prices
Electrical power
needs
World trade
Environment & Energy, Marine
11%
Legislation and
fuel cost
5%
www.alfalaval.com© Alfa Laval
Highlights Asia
Year-on-year comparison
Sequential comparison
July – September 2016, at constant rates, sequential comments
Asia:
Region negatively impacted by drop in
marine contracting. Service showed minor
decline, explained by fewer upgrades.
EQD grew, lifted by seasonal demand for
Comfort applications. PTD saw overall
decline, mainly driven by Energy & Process
while Food Technology had a good quarter.
South Korea and Japan declined due to
slowdown in ship contracting. China grew,
supported by the development in EQD and
PTD.
-38 -20
www.alfalaval.com© Alfa Laval
Highlights Europe
Year-on-year comparison
Sequential comparison
July – September 2016, at constant rates, sequential comments
Western Europe incl. Nordic:
Down as vacation period affected EQD
base business. M&D Equipment, Energy
& Process developed well, while rest of
segments declined.
While Nordic, UK, Benelux and France
grew, remaining regions declined.
+16 =
+13 +12
= -6
Central and Eastern Europe:
Poland, Turkey declined - Russia grew.
Russia did very well in the quarter,
boosted by improved activity in Comfort,
Power and Refinery. Service also did well.
www.alfalaval.com© Alfa Laval
Highlights Americas
Year-on-year comparison
Sequential comparison
+10 -9
-16 -6
July – September 2016, at constant rates, sequential comments
North America:
Decline due to fewer large projects than in the
previous quarter. Base business continued to grow.
Service was flat.
Water & Waste down, due to the non repeat. Energy
& Process, Industrial Equipment also declined. Rest
of segments did well.
Latin America:
Down due to continued low demand in Brazil, as well
as a non repeat of larger service project in Mexico.
Argentina had a good quarter across all divisions
and with a number of larger orders in food and
mining.
www.alfalaval.com© Alfa Laval Slide 33
Top 10 markets*
0 1 000 2 000 3 000 4 000 5 000 6 000
India
Benelux
Adriatic
Mid Europé
SEA
Japan
Nordic
South Korea
China
United States
SEK million at prevailing rates
= WY 2015
= LTM Q3 2016 *The development of the 2015 top ten markets.
www.alfalaval.com
Cautionary statement
This presentation contains forward-looking statements that are based on the
current expectations of the management of Alfa Laval Group.
Although management believes that the expectations reflected in such forward-
looking statements are based on reasonable assumptions, no assurance can be
given that such expectations will prove to have been correct. Accordingly, results
could differ materially from those implied in the forward-looking statements as a
result of, among other factors, changes in economic, market and competitive
conditions, changes in the regulatory environment, other government actions and
fluctuations in exchange rates. Alfa Laval undertakes no obligation to publicly
update or revise these forward-looking statements, other than as required by law
or other regulations.
© Alfa Laval Slide 34